Can a Texas city hire a law firm that employs a relative of the city manager, and does anyone have to disclose the relationship?

Plain-English summary

The City of Petersburg hired a city manager in April 2020 and began using a particular law firm in June 2020. In August 2021, the city manager's son-in-law joined that firm as an associate and did some legal work for the City. The Hale County Attorney asked two questions: whether the City's continued use of the firm is an impermissible conflict of interest under chapter 176 of the Local Government Code, and whether it is one under the Texas Disciplinary Rules of Professional Conduct. The requestor noted that the nepotism rules in Government Code chapter 573 and the conflict rules in Local Government Code chapter 171 did not appear to apply, and did not ask about them.

On the first question, the AG explained that chapter 176 is a disclosure law, not a ban. It applies to a "vendor" and a "local government officer." A city manager who is the executive officer of the city, or who exercises discretion in selecting or contracting with vendors, is likely a local government officer, and a law firm that contracts with the city is a vendor. A father-in-law and son-in-law are related within the first degree by affinity (marriage) under Government Code section 573.024(a), so the son-in-law is a "family member" of the city manager for chapter 176 purposes. That triggers two filing duties: the city manager must file a conflicts disclosure statement, and the firm must complete and file a conflict-of-interest questionnaire (both forms are on the Texas Ethics Commission's website). But chapter 176 does not void the contract; section 176.006(i) says a contract's validity is not affected solely because a vendor fails to file. So the answer to the first question is that the relationship requires disclosure, not termination of the contract.

On the second question, the AG declined to opine. The Disciplinary Rules govern when a lawyer must evaluate conflicts, including conflicts between a client's interest and the lawyer's or firm's own interest, but applying those rules to a specific set of facts is a fact-intensive inquiry that the AG's office has consistently said falls outside the opinion function.

What this means for you

If you are a city manager or local government officer

Based on this opinion, having a first-degree relative (here, a son-in-law by marriage) employed by a firm the city contracts with does not by itself bar the contract, but it likely triggers your duty under chapter 176 to file a conflicts disclosure statement with the entity's records administrator. The trigger in section 176.003 is tied to the relative receiving more than $2,500 in taxable income from the vendor in the 12 months before you became aware of the contract.

If you are a vendor (such as a law firm) contracting with a city

If your firm employs a family member of a local government officer of the contracting entity, the AG read chapter 176 to require your firm to file a conflict-of-interest questionnaire. Failing to file does not void the contract under section 176.006(i), but the filing duty still applies.

If you advise a city or county on contracting

The decisive points are that chapter 176 is a disclosure regime rather than a prohibition, that a son-in-law is a first-degree relative by affinity under Government Code section 573.024(a), and that the AG would not reach the Disciplinary Rules question because applying those rules to particular facts is outside the opinion function. The requestor had already set aside chapters 573 and 171, so the opinion does not address them.

Common questions

Q: Is it illegal for a Texas city to hire a law firm where the city manager's son-in-law works?
A: No. The AG concluded chapter 176 does not prohibit the contract. It requires disclosure filings, and a failure to file does not affect the contract's validity.

Q: Who has to file what?
A: The local government officer (likely the city manager) files a conflicts disclosure statement, and the vendor (the firm) files a conflict-of-interest questionnaire. Both forms are available from the Texas Ethics Commission.

Q: Is a son-in-law really a "family member" for this rule?
A: Yes. Under Government Code section 573.024(a), a father-in-law and son-in-law are related within the first degree by affinity (marriage), which is what chapter 176 uses to define a family member.

Q: Did the AG say whether this breaks legal ethics rules?
A: No. The AG declined to answer the Disciplinary Rules question because applying those rules to specific facts is a fact-intensive inquiry outside the scope of an AG opinion.

Background and statutory framework

Chapter 176 of the Local Government Code requires disclosure filings in specified circumstances rather than prohibiting contracts (sections 176.002, 176.003, 176.006). It applies to a "vendor" and a "local government officer" of a local governmental entity, with municipalities included as local government entities (section 176.001(3)). A "local government officer" includes an entity's executive officer and an agent who exercises discretion in planning, recommending, selecting, or contracting with a vendor (section 176.001(4)(B), (C), (1)). A law firm that contracts with the city is a "vendor" (section 176.001(7), (1-d), (6); Government Code section 311.005(2), applied through Local Government Code section 1.002).

Section 176.003 requires a local government officer to file a conflicts disclosure statement when the entity has executed or considers a contract with a vendor and the vendor has an employment or business relationship with a family member of the officer that yields more than $2,500 in taxable income in the relevant 12-month period (section 176.003(a)(1), (2)(A)). A "family member" is a person related within the first degree by consanguinity or affinity (section 176.001(2)), and a father-in-law and son-in-law are related in the first degree by affinity (Government Code section 573.024(a)). The firm has a parallel duty to file a conflict-of-interest questionnaire (section 176.006(a)(1)). Chapter 176 does not invalidate a contract for these relationships or for a failure to file (section 176.006(i)). The Texas Disciplinary Rules of Professional Conduct (Rule 1.06(a)) address lawyer conflicts, but the AG's office has consistently held that applying the Rules to particular facts is outside the opinion function, so it did not answer the second question.

Citations and references

Statutes:

• Tex. Loc. Gov't Code § 176.003 — conflicts disclosure statement required of a local government officer
• Tex. Loc. Gov't Code § 176.006 — vendor questionnaire; contract validity not affected by failure to file
• Tex. Gov't Code § 573.024 — relation by affinity, including father-in-law and son-in-law

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0428
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2023/kp-0428.pdf

Original opinion text

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

February 10, 2023

The Honorable James M. Tirey
Hale County Attorney
500 Broadway, Suite 340
Plainview, Texas 79072

Opinion No. KP-0428

Re: Whether the City's employment of an attorney who is the son-in-law of the city manager constitutes a conflict-of-interest under chapter 176 of the Local Government Code or the Texas Disciplinary Rules of Professional Conduct (RQ-0469-KP)

Dear Mr. Tirey:

You ask two questions about the employment of a law firm by a city.¹ You inform us that the city manager for the City of Petersburg ("City") began working for the City in April of 2020. The City began using a certain law firm (the "Firm") in June 2020.² Request Letter at 1. You further state that the city manager's son-in-law "joined the Firm as an associate in August, 2021, and performed some legal work on behalf of the Firm for the City." Id. at 1–2. You ask first whether the City's employment of the Firm "constitute[s] an impermissible conflict of interest under Chapter 176 of the Texas Local Government Code[.]"³ Id. at 1. We understand you to ask whether chapter 176 allows a city to contract with a law firm when the law firm employs the son-in-law of the city manager.

Chapter 176 of the Local Government Code

Chapter 176 requires the filing of certain disclosure statements in specified circumstances. See TEX. LOC. GOV'T CODE §§ 176.002 ("Applicability to Vendors and Other Persons"), 176.003 ("Conflicts Disclosure Statement Required"), 176.006 ("Disclosure Requirements for Vendors and Other Persons; Questionnaire"). The chapter applies to a "vendor" and "a local government officer of a local governmental entity." Id. § 176.002(1), (2). Chapter 176 defines a "local government entity" to include municipalities. Id. § 176.001(3). It defines a "local government officer" to include "an administrator . . . or other person designated as the executive officer of a local governmental entity," and "an agent of a local governmental entity who exercises discretion in the planning, recommending, selecting, or contracting of a vendor." Id. § 176.001(4)(B), (C); see also id. § 176.001(1) (defining "agent"). Thus, while you do not provide details of the city manager's duties and authority, the city manager is likely a local government officer of a local governmental entity subject to chapter 176. Further, the Firm meets chapter 176's definition of a "vendor"—"a person who enters or seeks to enter into a contract with a local governmental entity" and the person's agents.⁴ Id. § 176.001(7); see also id. § 176.001(1-d) (defining "contract" to mean "a written agreement for the sale or purchase of . . . services"), (6) (defining "services" to include "skilled . . . professional services").

Because the city manager and the Firm are likely subject to chapter 176, we next consider the chapter's disclosure-filing requirements. Section 176.003 requires a local government officer to file a conflicts disclosure statement with the local governmental entity's records administrator if, as pertinent here: (1) the local governmental entity has executed a contract with a vendor or considers such a contract; and (2) the vendor "has an employment or other business relationship with . . . a family member of the officer that results in the . . . family member receiving taxable income [exceeding] $2,500 during the 12-month period preceding the date that the officer becomes aware" of the local governmental entity's execution or consideration of a contract with the vendor. Id. § 176.003(a)(1), (2)(A).

As used in chapter 176, a "family member" is "a person related to another person within the first degree by consanguinity [i.e., by blood] or affinity [i.e., by marriage]," as described by specified nepotism statutes. Id. § 176.001(2). The applicable nepotism statute instructs that "[t]wo individuals are related to each other by affinity if: (1) they are married to each other; or (2) the spouse of one of the individuals is related by consanguinity to the other individual." TEX. GOV'T CODE § 573.024(a). A father-in-law and son-in-law are related to each other within the first degree of affinity. See id.; Tex. Att'y Gen. Op. No. GA-0186 (2004) at 3 (determining that an individual's relatives within the first degree by consanguinity include the spouse of the individual's child). Thus, the city manager has a duty to file a disclosure statement because the Firm contracting with the City also employs the city manager's son-in-law. For similar reasons, the Firm has a duty to complete and file a conflict-of-interest questionnaire. See TEX. LOC. GOV'T CODE § 176.006(a)(1) (requiring a questionnaire from a vendor who has a business relationship with a local governmental entity and has an employment or business relationship with a family member of a local government officer of the entity); see also id. § 176.001(1-a) (defining "business relationship").⁵

Accordingly, in answer to your first question, chapter 176 does not prohibit a contract between a local government entity and a vendor when one of the business or family relationships described in the chapter exists. See id. § 176.006(i) (providing that the validity of a contract is not affected solely because a vendor fails to file the required disclosure). Rather, it requires only that a local government officer and the vendor file a specified disclosure form. See id. §§ 176.003, .006.

Texas Disciplinary Rules of Professional Conduct

Your second question asks whether the City's employment of the Firm "constitute[s] an impermissible conflict of interest under the Texas Disciplinary Rules of Professional Conduct[.]" Request Letter at 1. The Texas Disciplinary Rules of Professional Conduct ("Rules") govern and provide guidance to enable a lawyer to evaluate the lawyer's potential conflicts of interest. See TEX. DISCIPLINARY RULES PROF'L CONDUCT R. 1.06(a), reprinted in TEX. GOV'T CODE, tit. 2, subtit. G, app. A (Tex. State Bar R. art. X, § 9). The conflict-of-interest rules concern not only potential conflicts between the interests of different clients, but also between the interest of a client and the lawyer's own interest or that of the lawyer's law firm. See id. preamble ¶ 7. However, this office has consistently explained that application of the Rules to particular circumstances involves fact-intensive questions outside the scope of the Attorney General opinion function. See Tex. Att'y Gen. Op. Nos. KP-0400 (2022) at 4, GA-0716 (2009) at 2, GA-0557 (2007) at 3. Accordingly, we cannot answer your second question.

S U M M A R Y

Chapter 176 of the Local Government Code requires disclosure when a local government entity contracts or considers contracting with a vendor with whom a local government officer of the entity has a specified employment, business, or family relationship. Chapter 176 likely applies when a law firm contracts with a city and the law firm employs the son-in-law of the city manager. The chapter does not prohibit a contract in such circumstances, but it requires the officer to file a conflict-of-interest statement and the vendor to file a conflict-of-interest questionnaire.

Whether a lawyer or law firm's employment in particular circumstances would constitute a conflict-of-interest under the Texas Disciplinary Rules of Professional Conduct involves fact-intensive questions that cannot be resolved in an Attorney General opinion.

Very truly yours,

KEN PAXTON
Attorney General of Texas

BRENT E. WEBSTER
First Assistant Attorney General

LESLEY FRENCH
Chief of Staff

D. FORREST BRUMBAUGH
Deputy Attorney General for Legal Counsel

AUSTIN KINGHORN
Chair, Opinion Committee

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee

¹ See Letter from Honorable James M. Tirey, Hale Cnty. Att'y, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (July 14, 2022), https://texasattorneygeneral.gov/sites/default/files/request-files/request/2022/RQ0469KP.pdf ("Request Letter").

² See City of Petersburg Council Meeting Minutes at 1 (June 11, 2020) (council action accepting the Firm's letter of legal services engagement agreement), available at https://petersburgtx.com/city-council/agenda-minutes/.

³ You state that "[a]s a preliminary matter, the nepotism provisions in Chapter 573 of the Texas Government Code and the conflict-of-interest provisions in Chapter 171 of the Texas Local Government Code do not appear to apply," and you do not ask any questions about those provisions. Request Letter at 2.

⁴ See also TEX. GOV'T CODE § 311.005(2) (providing that "person" in a statute is generally construed as including a "corporation, organization, . . . partnership, association, and any other legal entity"); TEX. LOC. GOV'T CODE § 1.002 (stating that chapter 311 of the Government Code generally applies to the construction of the Local Government Code).

⁵ The Local Government Officer Conflicts Disclosure Statement and the Conflict-of-Interest Questionnaire forms can be found on the Texas Ethics Commission's website. See https://www.ethics.state.tx.us/forms/conflict/.